Ministers call for 'new deal' with unions

Ministers have warned Tony Blair he must fight anti-union sentiment in New Labour as relations between the trade unions and the Government reach a new low.

Council workers will strike against what they see as a paltry pay deal on Wednesday, kicking off a summer of threatened industrial unrest among firefighters, railway workers and traffic wardens.

But, worried by the pincer attacks from New Labour advisers keen to break the union link and left-wing union bosses bent on cutting funding in the wake of declining influence, a group of influential ministers is urging the Prime Minister to renegotiate Labour's relationship with the unions and make it stronger.

Denis MacShane, the Foreign Office minister, has told The Independent on Sunday the time has come for a "new deal" between Labour and the unions. "Far from weakening the link between Labour and the unions, we need to strengthen it with a new deal based on consultation at the grass roots," he said.

Another minister said the relationship had reached "crunch time" and, in order to avert a damaging and embarrassing showdown at the party conference this autumn, Mr Blair had to "grasp the nettle" and "work through a new relationship with the unions".

But that task could be frustrated by the Government's continued insistence on using private firms to deliver public services and offering pay deals that fall well short of expectations. As the council workers prepared to strike, the GMB union this weekend published a new survey showing that they now earn less as a proportion of average earnings than during the "winter of discontent" in 1979.

Female local government workers, the study found, earn just over 90 per cent of average earnings, compared to 98 per cent in 1979, while male council workers have seen their wages fall from 86 per cent of national average earnings to 83 per cent today.

Anger among unionists has been heightened by the refusal of local government employers to discuss a possible increase from their 3 per cent pay offer at a time when local council leaders awarded themselves an average allowances increase of 64 per cent.

The GMB's general secretary, John Edmonds, said: "It's staggering to think that local government workers are actually earning less under Tony Blair than they were under Jim Callaghan and the 'winter of discontent'.

"No one wants to resort to industrial action but with the employers refusing our offer of peace talks and Downing Street seemingly happy to let this crisis unfold before their eyes, our members feel they have nowhere left to run.

"If it is OK for the new breed of town hall fat cats to award themselves telephone number increases in their allowances, surely an extra 20p an hour for those who provide such a vital public service is not too much to ask."